Changes to Massachusetts Estate Tax Exemption Amount Announced

The Massachusetts House and Senate passed House Bill 4104, which Governor Maura Healey signed into law on October 4, 2023. This new law will amend the Massachusetts estate tax in several important ways.

Change to MA Estate Tax Exemption Amount.

The law changes the threshold for a taxable estate from $1,000,000 to $2,000,000, effective for decedents dying on or after January 1, 2023 and allows a credit of up to $99,600 to the decedent’s estate. This doubles the size of estates that will not be subject to estate taxes, substantially reduces the number of estates that will be required to file a Massachusetts return, and allows all estates a credit of up to $99,600 against estate taxes.

No MA Estate Tax on Estates of Less than $2,000,000.

The law states that estates of decedents dying on or after January 1, 2023, shall not be required to pay any tax if the value of the federal taxable estate is not more than $2,000,000.

No Change to MA Estate Tax Rate.

The MA estate tax rates are expected to remain the same for estates totaling more than $2,000,000, with estate tax rates ranging from 7.2% up to 16% based on the value of the estate.

Change in Calculation of the Estate Tax for Property in Multiple States.

The law makes a change to the formula for calculating state estate taxes when a decedent owned property in multiple states. The new law will simplify the calculation of the MA estate tax so that MA estate tax will be proportional to the value that the Massachusetts property bears to the entire estate.

Effective Date.

It is important to note that these tax changes are retroactive to decedents who died on or after January 1, 2023. Estates of decedents who died early in 2023 that have MA estate tax returns coming due in the near future should consider filing for an extension of time to file and await revised forms from the Department of Revenue’s Estate Tax Division. Estates of decedents who died on or after January 1, 2023, which have already filed and/or paid estate taxes should file for a tax refund based on the new tax threshold and available credit.

Impact on Estate Planning.

The new law will eliminate the need for estate tax planning for individuals with assets expected to be under $2,000,000, and will potentially enable married couples with assets up to $4,000,000 to completely eliminate the MA estate tax with proper planning . If you have concerns about how this law may affect your estate plan, you should contact your estate planning attorney at Seder & Chandler.